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Wednesday, May 23, 2012

Signing my life away

I have finally buckled down and completed all of my financial aid paperwork. I have officially accumulated $77,500 dollars worth of debt. I expect to be borrowing on average $80,000 dollars per year for my four years of medical school for a grand total of $320,000.

With so much money owed, I knew no amount of complaining could help.

I looked into repayment plans (I hope this will be useful to some readers out there as well!). With a good plan and good luck, hopefully I won't be spending the rest of my life shackled to the cost of my education.

The Good News:

Income Based Repayment (IBR). The IBR is for people with loans substantially larger than their income - in other words, one needs to demonstrate a partial financial hardship. Usually, one would expect to pay only about 10-15% of their income (minus 150% of the poverty line). For a family of just me, makng about $50,000 a year during my residency years, I would only be expected to pay about $400 dollars every month. This is much more manageable than the 10 year repayment plan (the standard). For the first few years of my career, this is the only viable option given the amount of debt that I will have.

Public Service Loan Forgiveness (PSLF). For doctors, this can be an amazing plan. After 120 on-time payments (10 years), whatever amount of money you still owe will be forgiven and the amount forgiven will not even be taxed! There are some caveats:

You must work in a public service job (non-profit or government organization). Most hospitals qualify as an acceptable employer (62% are non-profit and 20% are government hospitals).

You must be working full timein the public service job during repayment, when you're applying, and when you receive forgiveness. This means there's no skimping out. You have to work the full ten years (at least) in providing a public service.

It's all or nothing. Just because you paid 119 payments doesn't mean you're entitled to most of the forgiveness. You have to satisfy EVERY portion of every requirement for the government to accept your application.

The Bad News:

Uncertainty. The government does not have any assurances that the PSLF program exist indefinitely. Like any bill, it will come under scrutiny and review. When it does, who is to say that it will remain in its current form? Mark Kantrowitz wrote an article denouncing the use of PSLF by doctors, who he argues only have short terms of low income (residency years only). Who knows if reform is on its way to restrict the use of this forgiveness program?

Either way, I have to borrow what I have to borrow. A girl's got to do what a girl's got to do.